The latest compliance issues in wealth management across Asia-Pacific.

ASIC
Australian financial watchdog ASIC has imposed conditions on the financial services licence of the operations of Aurora Funds Management.

This follows ASIC undertaking enquiries into the misappropriation of $1 million of investor funds from the AUP in February 2017 by Aurora’s former chief financial officer, Betty Poon.

At ASIC’s intervention, Aurora repaid the $1 million to the AUP and compensated it for lost earnings on those funds prior to any recovery.

ASIC remains concerned that the misappropriation, and Aurora’s failure to detect it for several months, occurred because of deficiencies in Aurora’s corporate governance and risk management frameworks. Poon held several senior and conflicting roles that facilitated the occurrence and cover-up of her fraud.

As a result, ASIC has imposed licence conditions that require Aurora to engage an ASIC-approved independent expert to assess and report on the adequacy of its resources, corporate governance and risk management practices. Aurora has agreed to the conditions and must engage an independent expert by 30 June.

The independent expert will report to ASIC and Aurora and provide interim recommendations for any steps that Aurora should take to ensure that its procedures are adequate by 1 October. 

Aurora is required to inform ASIC of any recommendations that it will not implement and explain why it will not do so. The independent expert will then provide a final report to ASIC and Aurora by 29 March 2019.

HKMA, ADGM
Abu Dhabi Global Market, the international financial centre in Abu Dhabi, and the Hong Kong Monetary Authority have signed a co-operation agreement to jointly promote and enable financial services innovation.

The agreement will also accelerate cross-border fintech business opportunities in Hong Kong and the United Arab Emirates (UAE).   

The new agreement will allow the HKMA and the Financial Services Regulatory Authority (FSRA) of ADGM to collaborate and refer innovative businesses and activities to each other’s market, facilitate greater sharing of relevant information, providing support in the authorisation processes where appropriate, and explore projects that are mutually beneficial to both jurisdictions.

ASIC
The Australian regulator has banned Mark Damion Kawecki of Frankston, Victoria from providing financial services for seven years, after a probe unearthed his fraudulent behaviour in applying for shares.

The Australian Securities and Investments Commission  had examined  Kawecki’s conduct when applying for shares under the initial public offerings of companies that subsequently listed on ASX between 2015 to 2017. Kawecki gave false information about the identity of the beneficial holders of shares that he applied for in the name of entities he owned and controlled; he also gave false addresses for those applying for shares, and was paid a fee for the applications.

Following a hearing, the organisation said it found the man had failed to comply with a financial services law by knowingly engaging in conduct that was likely to mislead, in contravention of s1041H(1) of the Corporations Act.

Kawecki has a right to apply to the Administrative Appeals Tribunal for review of ASIC’s banning order.

AMP
In a separate case, ASIC has taken a civil penalty action against AMP Financial Planning  for alleged failures relating to insurance advice. The regulator has kicked off proceedings in the Federal Court against the firm for allegedly failing to ensure its financial planners respected the "best interests" duty and related obligations under the Corporaton Act.

ASIC alleges that certain AMPFP financial planners engaged in "rewriting conduct" – providing advice that results in the cancellation of the client’s existing life, TPD, trauma and/or income protection insurance policies and the taking out of similar replacement policies by way of a new application rather than by way of a transfer.

By advising clients to submit new applications, the financial planners stood to receive higher commissions than they would have received under a transfer, whilst at the same time exposing the clients unnecessarily to underwriting and associated risks. ASIC alleges that this type of advice was inappropriate, and that the financial planners failed to act in the best interests of the clients and to prioritise the interests of the clients.

ASIC contends that by 1 July 2013, AMPFP knew or ought to have known that its authorised financial planners were (or there was a risk that they were) engaging in rewriting conduct and the detriment this conduct caused to the clients, yet in the period from 1 July 2013 to 30 June 2015 AMPFP failed to take reasonable steps to deal with the conduct in contravention of section 961L of the Act. The proceeding is listed for a directions hearing in Sydney on 27 July 2018, the regulator said in a statement yesterday.

The regulator has been stamping out what it sees non-compliant and incompetent wealth management advice in recent years; as many as about 50 wealth advisors have been banned from the sector.